$61 a week extra in MPs' pockets

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Federal MPs are about to receive $61 a week extra in their pay packets, while the average wage-earner receives nothing.

A decision by the Remuneration Tribunal to increase salaries for some government executives will flow on to all MPs on July 1.

The 3.9 per cent salary increase for Principal Executive Officers (PEOs) of bodies such as the ABC - to which the MPs' base salary is automatically linked - was quietly posted on the Remuneration Tribunal website on Thursday.

The salary boost for PEOs and MPs, which will increase their base rate from $102,760 to $106,767, gives them a weekly pre-tax increase of $77. After tax, this works out to be about $40.

Their high-income status means they will all receive a weekly tax cut of $21 at the start of the new financial year. All up, on July 1 the take-home pay of MPs will increase by a healthy $61 a week.

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When the second round of tax cuts kicks in 13 months from now, MPs wallets will again swell with another $21 - and the Remuneration Tribunal's annual PEO review will bump that up by at least another $40 after tax.

So while average wage earners will receive nothing in the same period, and most high-income earners will get $42, federal MPs will take home at least an extra $120 a week.

The Government has drawn flak from middle Australia and welfare groups for unashamedly targeting high earners for big tax breaks.

Mr Costello went on to the front foot on budget night to justify the special treatment as necessary for Australia's continuing productivity.

"This will make Australia more internationally competitive," he said.

"It will increase incentives. It will particularly appeal to those people in middle-income brackets looking for a promotion or to upgrade skills."

In 1999 the Government decided the easiest way to avoid being seen to reward politicians with hefty pay rises was to link the parliamentary base salary to a "reference salary" within the tribunal's Principal Executive Office Structure.

The generosity of the tribunal's ruling this year means backbenchers will pull in more than $160,000 in salary and allowances. Travelling and postal allowances could easily bump it up another $20,000 a year.

Rates of pay in the PEO Structure, including the parliamentarians' reference salary, are reviewed by the tribunal and adjusted from July 1 each year.

Politicians' base salaries are topped up according to positions held. Everyone from a minister to chairman of a parliamentary committee gets some sort of extra payment.

The Prime Minister, for instance, receives an extra 160 per cent of the basic rate, bringing his salary after July 1 up to about $284,000.